Chapter 4 Video: F Given A and A Given F

Equivalence For Repeated Cash Flows

Transcript Area

In this Excel tutorial I'm going to show you how to find a future value given that you're have an A or how to find F given A. Now notice here in the spreadsheet that I have some information. Say I have a savings account that pays me weekly interest of point 0.05 percent, out of my paychecks I can handle about $25 a week I could put away and I've got 24 weeks before I head out for spring break. So how much money am I going to have available to go to spring break? Well let's take a look. You can simply go to the cell and type equals. Now in this case we're looking for a future value. In an Excel that's FV, so I’m simply going to type FV, start my parentheses. And notice, I find this odd that Excel does this sometimes in previous tutorials you've seen this little thing right here come up under my formula bar, but in this case it came up right underneath the cell. So, just follow along.

The first thing it’s asking for is, what is our rate? Our rate is in B2 comma, notice the comma moves me now to, what are you, how many weeks are we doing Nper is in. And I just click cell B4 comma payment is what they consider an Excel to be an A. Remember an A is a uniform payment, such as a car payment, it’s a same amount you pay every month or perhaps a mortgage. So, I do comma and my payment is $25 per week and I don't have a present value and I don't have a type so I can simply close my parentheses and hit return. And what this says is that in the future, oops! It says I will have a negative value. In order to you to fix that I need to go to the formula where it has weekly deposits, that's money and putting away. So B3 apparently needs to be negative. I need to put in the right spot or it'll give me an error, okay. And it says in the future I’d have $603.46 for spring break. So that's one way you can do this calculation.

Another way is to say, well hey, I need a $1000 for this spring break trip, so how much money am I going to have to put away per week out of my paycheck to be able to do this? So, here what you're solving for is you're solving for the A and you can use a very similar formula. If you're looking at these are a lot of in these tutorials it is the same formula they just twisted a little. So in this case remember an A is represented by PMT in Excel, so I just simply type equals PMT, start my parentheses and it asked for my rate and that was B2 comma, my n, which was 24. Then it asks, I don't have a present value so comma but to skip to the next one just comma again. Future value I want is $1000 and that's all I have so I close the parentheses. And that tells me that I need to deposit $41.43 per week. Notice it's in the red with the parentheses, that's Excel’s way of saying that it's a negative value. That's money that you're putting away every week so that you would have $1000 to go on spring break. In this tutorial I've shown you how to solve a future value when you have an A or how to solve for an A when there's some future value that you want.